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Fed Raises 25 bps, Predicts No Recession

The Fed came in as promised, with a 25 bps rate hike, with another hike left on the table. Markets seemed to like the news, especially as Powell took to the podium to answer questions in his traditional idiotic contradictory opaque vague way. There were some key takeaways from the conference that pushed markets higher and a few blunder giveaways into the direction the Fed is leading.


  • Fed is leaving all options on the table but signals to another rate hike on the table

  • Fed puts more focus on Core CPI vs Head CPI ( Core CPI is ~5% vs Head of ~3%)

  • Fed is sticking to 2% target, with prediction it won't come until 2025

  • Fed will most likely pause rate hikes after 2023 into 2025

  • Fed economists no longer predict a recession (which is a change in view)

  • Fed however is showing an increase in labor supply and a lowering in demand

I want to touch on the last point which is quite interesting in a macro economic sense. Labor supply is increasing as COVID stimulus is over and people are having to go back to work and can't live off the government anymore. This increase in labor supply is going to start putting pressure onto unemployment. Labor demand is lagged but it is steadily declining as companies are downsizing, pulling job openings, and tightening belts as the slowing economy is starting to cause financial pain. This labor supply demand is quite interesting, and to me is a key signal into a recession. Unemployment per the Fed is 4%, and as I said I focus on real unemployment. The last print for real unemployment is pushing 15%, which is most likely getting into full recession territory .


The market is flying early this morning as traders took this news as bullish, despite continued pressure on the tech industry. Meta ripped in after hours as continued ad growth and their new AI push comes into view.


TRADES:


I was set up long on META earnings with a good chunk of call options , as GOOG signaled positive results in their release a day prior. META is up 10% in premarket.


 

INSTAGRAM: daytrading_traveler





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